Conn's, Inc. (NASDAQ:CONN) Q3 2020 Earnings Conference Call - Final Transcript

Dec 10, 2019 • 11:00 am ET


Conn's, Inc. (NASDAQ:CONN) Q3 2020 Earnings Conference Call - Final Transcript


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Good morning and thank you for holding. Welcome to Conn's Inc. Third Conference Call to discuss earnings for the fiscal quarter-ended October 31st, 2019. My name is Rob and I'll be your operator for today. During the presentation, all participants will be in listen-only mode. After the speakers' remarks, you will be invited to participate in the question-and-answer session. As a reminder, this conference call is being recorded.

The Company's earnings release dated December 10th, 2019, was distributed before market open this morning, and can be accessed via the Company's Investor Relations website at During today's call, management will discuss, among other financial performance measures, adjusted EBITDA, adjusted net income and adjusted earnings per diluted share. Please refer to the Company's earnings release that was issued today for a reconciliation of these non-GAAP measures to their most comparable GAAP measures.

I must remind you that some of the statements made in this call are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements represent the Company's present expectations or beliefs, concerning future events. The Company cautions that such statements are necessarily based on certain assumptions, which are subject to risks and uncertainties, which could cause actual results to differ materially from those indicated today.

Your speakers today are Norm Miller, the Company's CEO, Lee Wright, the Company's COO, and George Bchara, the Company's CFO. I would now like to turn the conference call over to Mr Miller. Please go ahead, sir.

Norman L. Miller

Good morning and welcome to Conn's third quarter of fiscal year 2020 earnings conference call.

I'll begin the call with a strategic overview, then Lee will provide additional details on the quarter, before turning the call over to George, who will complete our prepared remarks with additional comments on the financial results.

Strong credit results, combined with our highly profitable retail business, resulted in a 13% increase in third quarter earnings per diluted share. Year-to-date earnings have increased 26% to $1.74 per diluted share, and our year-to-date adjusted EBITDA has increased nearly 8% to $156 million, producing an adjusted EBITDA margin of approximately 14%. Our strong year-to-date earnings demonstrate the power of our business model, despite challenging retail sales.

Almost four years ago, we communicated our long-term credit strategy, aimed at producing a credit spread of approximately 1,000 basis points. I am pleased that our credit spread was above this level during the third quarter, which produced positive credit segment income for the first time in 5.5 years. Our credit model is the foundation of our business and enables our unmatched value proposition for our core customer. As our credit strategy matures, we will remain disciplined in our approach to protect the overall health of the business, while pursuing initiatives aimed at optimizing retail sales.

We are disappointed that our third quarter same-store sales declined 8.4%, which reflects the impact of prudent underwriting adjustments and unprecedented market dynamics within our consumer electronics category. During the third quarter, we began to see deteriorating performance of certain